Manufactures, distributes and retails plastic building block kits - LEGO Primo, LEGO Duplo, LEGO System and LEGO Technic
Employees 10 000 people
Revenue US$1.1 billion
CEO, Kjeld Kirk Kristiansen
New businesses - LEGOland, LEGO Lifestyle, LEGO Media, LEGO Mindstroms
1984 Early R+D
1986 Launched computerized building set for schools; deemed premature
1993 Strategic business unit created after the successful trial of a programmable brick
1995 Home PC ownership and Internet usage is sky-rocketing. Market dominated by game-oriented ‘edutainment’ products
1996 Target market identified: Conscious, Caring and Capable parents, (CCC), 20% of US households
1997 LEGO Mindstorms launches
Integrate or continue unabated?
Macro Environmental Analysis
Political Instability in the developing world; WTO free-trade negotiations breakdown; and European Parliament elections.
Economic Euro introduced as Denmark abolishes the Krone; changes to the Danish taxation system; and the Internet boom is still aiding economic growth
Sociological Changing attitudes to early childhood development; away from instructional methods; and leisure time is evolving from outdoor activities.
Technological Speed of information technology increasing; communication networks impacting on society; and internet and PC games impacting the toy market.
Legal Labour market reforms in Denmark; and potential changes to intellectual property laws.
Environmental Increasing global concern for the environment; over consumption and over population; governments intervening
Flexibility Adaptation; speed to market; pricing; and distribution.
Innovation In products; services; support; and technology features.
R+D Continual new and exciting products
Brand awareness Market appeal
Economies of scale Vital for profit margin
Business Synergies Across LEGO group
Critical Success Factors
Extensive distribution network;
Success in addressing org. mindset problems; and
High brand awareness amongst target market.
Flexible, timely operations;
Products reflect LEGO’s foundation; and
Strong launch and initial sales.
‘ Instructionism’ products;
Poor sales growth in recent years; and
Viewed as ‘ entertainment ’ rather than ‘ education’ company.
Staff that lack LEGO knowledge
New alliances with major players, i.e. Lucas Films and Star Wars brand; and
Economies of scale opportunities through integration with Mindstorms .
Further market penetration; and
Establish new target market with schools.
New competitors; and
Increased internal conflicts;
Unfamiliar substantive competitors, i.e. Sony, Microsoft, Nintendo and Sega.
Corporate Strategy Perspectives
LEGO’S Current Corporate Strategy Since the early 90’s senior management have been working towards an integrated organisation perspective; CEO was preaching a universal approach revolving around ideas, exuberance and values; and Merging activities and processes to become more efficient, realizing synergies ahead of retaining responsiveness.
LEGO’S Current Corporate Strategy Formally structured core business; Strategy was focused on planning, forecasting trends, and product programming. The fitness program , involves reducing organisational layers and staff, clearer lines of responsibilities and a greater customer focus. Predictable product lifecycles; Continuous marginal improvement;
Business Strategy Perspectives
LEGO’S Current Business Strategy Variance in business strategies across the SBU’s; New business units have an outside-in perspective; Core business has an inside-out perspective; but Recent core activities project a change towards a market focused strategy (outside-in strategy).
Mindstorms Capabilities HR Experienced early challenges; hired externally; global recruitment; seeking fast paced innovative employees. Marketing Decentralised from LEGO core. Pricing For price leadership. Distribution Hybrid non-traditional channeling created conflict with the core distribution. Promotion Outsourced PR/advertising focused only on the US market.
Mindstorms Performance Financial Sales are 1% of LEGO; goal to increase growth rapidly; high cash needs; and financial losses in 1998 resulted in 1000 job losses. Customer Creating awareness; online communities are attracting adults; competitive robotic events are attracting children. Internal Build strong supply chains; operational efficiency; economies of scale. Growth Synergies aligned with constructionist values and core competencies; responsiveness to market through innovative.
Hybrid Corporate Perspective
Manufacturing and Production Sharing value-added activities; Lean manufacturing; Parallel production processes; and Economies of scale.
Suppliers and Channel Partners Aligning positions to improve competitiveness; Channel partner synergies; and Strengthening existing relationships
Internal Cultural Challenges Remain innovative; via The creation of a Mindstorms Champion Group.
De Wit, B and Meyer, R 2004, Strategy:process, content, context. International Thomson, Singapore Ireland R D., Hoskisson R E. & Hitt M A., 2008, Understanding Business Strategy, Concepts & Cases 2 nd Ed. Cengage Learning, Hubbard, G 1990, Analysing a Case, in Cases of Strategic Management: Australia and New Zealand, G Lewis, A Morkel, G Hubbard, G Stockoprt, and S Davenport (eds), 2 nd ed, pp. viii-xvi, Prentice Hall Sydney Porter, M, (1998) Competitive Strategy: Techniques for analyzing industries and competitors , Free Press 1999 Statistics, Denmark viewed on August 10, 2009 <http://www.dst.dk/HomeUK/Guide/economico/1999.aspx > Environmental Issues – Global Issues viewed on August 10, 2009 < http://www. globalissues .org/issue/168/environmental-issues > Lego Financial Accounts 2001 viewed on August 20, 2009 < http://cache.LEGO ｮｮ. com/downloads/aboutus/accounts2001eng. pdf > Lego Mindstorms – What went wrong? Viewed on August 20, 2009 < http://www. techuser .net/LEGO ｮ. html > Lego Pressroom Archives displaying historic financials viewed on August 20, 2009 < http://www1.LEGO ｮ. com/eng/info/default.asp? page=pressdetail & contentid=99 & countrycode=2057 & yearcode=2000 & oldXML=true &archive=true > Effects of Overconsumption and Increasing Populations viewed on August 10, 2009 < http://www. globalissues .org/article/216/effects-of-over-consumption-and-increasing-populations > BCG Growth-Share Matrix viewed on August 20, 2009 < http://www. netmba . com/strategy/matrix/bcg/ > Historic Exchange rates viewed on 10 August, 2009 < http://www.xe.com/ict/>